Seventy-Eighth Street & Broadway Co. v. Purssell Manufacturing Co.

Page, J. The defendant purchased from the receiver in bankruptcy of a bankrupt corporation all the property of the bankrupt, including a lease of certain premises in the city of New York, of which the plaintiff was landlord and the defendant became the successor of the bankrupt pursuant to section 9 of the Stock Corporation Law. On April 30, 1914, the defendant abandoned the premises and an action was brought against it by the plaintiff in the Municipal Court to recover the instalment of rent which became due on May 1, 1914. On appeal to the Appellate Division in that action it was held that the defendant was an assignee of the lease and as such was liable for the rent reserved therein by reason of its privity of estate irrespective of whether it remained in possession and an abandonment of the premises was insufficient to defeat the plaintiff’s right to recover the rent. Seventy-Eighth Street & Broadway Co. v. Purssell Mfg. Co., 166 App. Div. 684. The court said at page 685: “ The acceptance of the assignment creates a privity of estate between the lessor and the assignee, and it is not material that such acceptance was followed by the assignee’s entering into possession of the premises. (Stone v. Auerbach, 133 App. Div. 75; Tate v. Neary, 52 id. 78; Tate v McCormick, 23 Hun, 218.) The privity of estate thus created, however, may be terminated by assignment of the lease or by surrender of the premises with the consent of the lessor. (Frank v. N. Y., L. E. & W. R. R. Co., 122 N. Y. 197; Dassori v. Zarek, 71 App. Div. 538; Tate v. McCormick, supra.) But until that privity of estate has been terminated, the assignee remains liable for the rent stipulated to be paid.” The present áction is brought to recover four instalments of rent under the lease, falling due on the 1st day of June, July, August and September, 1914, [180] respectively. The defendant offered evidence to prove that on the 23d day of May, 1914, the lease was assigned to one Samuel N. Smith, and the assignment accepted by him on that day. In the absence of facts showing an assumption of the covenants of the lease by the defendant and hence a privity of contract with the plaintiff, this assignment was sufficient to defeat the plaintiff’s claim for subsequent instalments of rent. Frank v. N. Y., L. E. & W. R. R. Co., supra. There was no express assumption of the lease by the defendant at the time of the assignment, but the plaintiff claims that such an assumption should be held to have been made when the promoters of the defendant corporation sought and obtained the consent of the plaintiff to their tenancy and then promised to pay the rent. Particular reliance is placed upon a letter written by one Walsh, who was afterwards the first president of the defendant corporation, to the plaintiff on May 23, 1912, before the incorporation of the defendant, in which he stated: “ We took possession of the Purssell Mfg. Co., business May 10th, inst. The transfer of the stores, leases and assets has just about been completed. We therefore take pleasure in enclosing checks for the full amount due for May/12 rent for the stores Broadway at 78th St. and Broadway and 99th St. The checks in the future will be sent promptly as formerly.” Assuming that the acts and engagements of the promoters are binding upon the corporation subsequently formed, I am nevertheless of the opinion that no assumption of the lease was shown. The promise to pay the rent was absolutely without consideration:' Though originally the consent of the landlord was necessary to make a valid assignment of the lease, the bankruptcy of the tenant and assignment by operation' of law to the defendant 'destroyed this- re? qui’rement and passed good title to the purchaser from [181] the receiver, irrespective of the landlord’s consent. Gazlay v. Williams, 210 U. S. 41. No other consideration for the assumption of the lease has been shown. The lease had already been assigned. There was accordingly no contract made by the promoters with the plaintiff upon which the defendant could he held liable. It is claimed on behalf of the respondent that the defendant corporation, having taken over the property of its predecessor, including the leases in question, is thereby held to he hound by all the obligations which accompanied them. I think, however, that this rule applies in the case of a lease of real property only to the same extent as in a similar transaction between natural persons, namely that the defendant is hound by privity of estate to perform,all the covenants which run with the land, so long as the privity of estate continues and its further obligation ceases with an assignment of the lease. Section 9 of the Stock Corporation Law which provides that upon reorganization of a corporation, upon the sale of the corporate property and franchises to a successor corporation, “ such corporation shall be vested with and be entitled to exercise and enjoy all the rights, privileges and franchises which at the time of such sale belonged to or were vested in the corporation last owning the property sold, or its receiver, and shall be subject to all the provisions, duties and liabilities imposed by law on that corporation,” relates only to obligations imposed- by law and is not in my opinion broad enough to impose upon the defendant contractual obligations of its predecessor which it never assumed. The judgment appealed from should he reversed, with costs, and the complaint dismissed, with costs. Bijur and Shearn, JJ., concur. Judgment reversed, with costs.